Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increasing government spending on infrastructure projects to create jobs and boost demand.
B
Implementing tax cuts for high-income earners, expecting them to invest more in the economy.
C
Reducing government spending to decrease the national debt, which will stabilize the economy.
D
Increasing tariffs on imports to protect domestic industries, thereby increasing domestic production.
Understanding the Answer
Let's break down why this is correct
Answer
During a recession, one of the most effective fiscal policy actions to stimulate economic growth is increasing government spending. When the government spends more money on projects like building roads or schools, it creates jobs and puts money into people's hands. This extra income encourages consumers to spend more, which helps businesses grow and can lead to more hiring. For example, if the government invests in a new highway, construction workers get paid, and they might then spend money at local shops, boosting the economy. This action is classified as effective because it directly injects money into the economy, helping to revive demand and support overall growth.
Detailed Explanation
Increasing government spending on projects helps create jobs. Other options are incorrect because The idea is that rich people will invest their tax savings; Cutting spending can hurt the economy more during a recession.
Key Concepts
Fiscal Policy
Recessionary Gaps
Aggregate Demand
Topic
Fiscal Policy in Recessions
Difficulty
hard level question
Cognitive Level
understand
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